Brexit: It’s Not All About Immigration

 

Like them or loath them, UKIP did a great job at the General Election last year in raising the subject of our membership of the EU and whether we should continue to be ‘in’. Such was their success, that here we are facing a referendum on the very subject.

 

It costs the UK £8 billion ‘officially’ to be a member of the EU. However, UKIP would argue that it is nearer £200 billion when you factor in the many associated costs of EU immigrants living in the UK (cost to public services, NHS, welfare benefits, etc.).

 

Whilst there are a huge range of factors that should be taken into account on whether we retain membership of the EU, the brutal reality is that the actual debate and headlines will all be about immigration and the strain that EU immigrants put on our public services and welfare benefits system. To be fair, it already is.

 

It really is political point scoring with voters to debate the things that will generate the most positive headlines for their own argument. Sad but very true.

 

The simple reality is that 93% of all social benefits paid in the UK go to UK nationals with only 2% paid to EU nationals living in the UK. That’s it……just 2%.

 

So just remember when there is vast air time given to political debates on immigration, the reality is that the issue is far smaller than you will be forced to think.

Brexit: Referendum Off & Running

With David Cameron’s recent trip to Brussels to negotiate a better deal for the UK deemed a success (well, in his eyes), a date for the referendum on whether to remain in the EU and the compulsory political flirting with us voters, has been set for 23 June 2016.

 

The Tories and David Cameron would have you believe that the referendum was all their masterplan for the ‘good of the people’. However, it really all started when UKIP caused quite a stir in the General Election in 2015 when their very upfront stance on closing the UK borders and leaving the EU gained quite some popularity amongst voters. To such an extent, major political parties agreed to hold a referendum on whether to remain in the EU by the end of 2017.

 

Broadly, there are 3 major campaigning parties that want to remain ‘in’ the EU and one that wants ‘out’. Those that want to remain ‘in’ wanted the referendum as soon as possible to leave little time for the ‘out’ campaign to gain any momentum. In the same way as the Scotland independence vote, the referendum will dominate press / TV / social media with political twisting for the next 3 months. 

 

The key ‘in’ and ‘out’ campaigning topics are likely to be dominated by:

 

• Cost of Membership 
• Immigration
• Jobs 
• Regulation 
• Trade 
• Foreign Direct Investment 

 

Whilst the principle of the EU is ‘freedom of movement of goods, services and people’, there are some key economic points to consider:

 

               57% of UK goods / services are bought by EU countries.

 

               53% of goods / services bought by the UK come from EU countries.

 

David Cameron’s recent visit to Brussels was to negotiate better terms for the UK so that he can campaign that it is better to stay ‘in’ and that the terms are far better. The key parts of the UK deal he brokered were:

 

• Allowing Britain to opt out from the EU's founding ambition to forge an "ever closer union" of the people of Europe.
• Allow greater powers to national parliaments and to block EU legislation.
• Restrictions on other EU nationals getting in-work benefits in the UK.
• Explicit recognition that the Euro is not the only currency of the EU.
• Obtain guarantees to ensure countries outside the Eurozone are not disadvantaged or have to join Eurozone bailouts.
• A reduction of the "burden" of excessive regulation and extending the single market.

 

So there you have it……the referendum political campaigning trail has officially started.

 

I’m not really too sure I can take months of political spin being force fed……let’s hope the referendum arrives quickly!

 

 

Fearful 2016

It is fair to state that it has been an extremely gloomy start to the year from an economic and investing perspective.  

 

However, the reality of this seems to be lacking perspective. We need to look at what is actually happening in the real economy instead of focusing on the headlines.

 

Firstly, let’s consider oil. Oil price decline has in fact been driven by oversupply rather than simply a decline in demand. A decline in demand could be an indicator of longer term recession. But the collapse in the oil price is partly driven because OPEC are operating at maximum output when demand just doesn’t warrant it. This provides a boost to consumers, businesses and oil-importing countries and could be a net positive for the global economy. It is putting more money in consumers’ pockets and this will feed through to increased spending eventually.

 

Secondly, we have China. We know that China’s economy is going through a ‘rebalancing’ away from an exports driven economy to something more diverse. There has been a large decline in capital investment and industrial production but broader data on the rest of the economy is still relatively good. In fact China is actually performing better than the press headlines suggest. 7% economic growth for 2015 is far from a poor performance (2.5 times that of the UK and US).

 

Thirdly, let’s consider economic growth. While financial markets are focused on China and plunging commodities prices, it is important to remember that recent employment data from the US, UK and Europe shows these economies are still growing.

 

So there you go……reality check over and hopefully a little perspective from the 'scary reading seeking headlines'.

Fiscal Smoke & Mirrors

 

Recent figures from the Government independent Office for Budget Responsibility (OBR) show that public borrowing was £7.5 billion in December 2015. Given that this was £4.3 billion lower than December 2014, this was quite a result.

 

Or was it?

 

Now come on, you know the rules by now……always believe there is more to the story than just the headline we are force fed on!

 

The December 2015 borrowing figure of £7.5 billion takes borrowing for the financial year to date to £74.2 billion. This makes the running total already above the £68.9 billion forecast for the whole fiscal year by the independent Office for Budget Responsibility (OBR). And there are still 3 months to go!

 

So there you have it…..the real story. After all of the Public Sector cuts and austerity measures, the debt is still way off target. And just to cheer you up further……total public sector debt (excluding support for banks) now stands at £1.54 trillion.

 

And for dramatic effect, that’s £1,540,000,000,000.